Real Estate Snippets

What's a Girl to Do? Part 2

My colleague was asking two questions when she threw her hands in the air.  "What's a girl to do?" encompassed more than one aspect of her last transaction.

The listing agent was a heavy hitter, a top producer, a multi-million dollar producer, a "professional" (by Chris Galler's definition) . . .  Let's see.  Are those all the labels this agent had earned?  No, he had also earned the labels of condescending, disrespectful, lazy, law breaker, and sloppy in my colleague's eyes.

"What's a girl to do"?  Outside of the closing room and in the broker's office, repercussions for the agent's actions were discussed.  Strategy was examined.  The agent's actions were worthy of a report to the Commerce Department, but would the offense be shrugged off by the clout of the big company and the agent's top producer status?   A report could be made to the governing Board of REALTORS®  as well, but a fine would be minimal for a top producer's pocket.  The MLS?  Probably not the right venue.

At the very least a "courtesy" call to the listing agent's broker needed to be made.  Because the real estate broker holds the licenses for all of the agents in their firm, the broker has supervisory responsibility and liability for any agent's wrong doing.  The buck stops with the broker.  The broker would want to know.  At least the broker should want to know!

In like manner, my colleague's decision on what to do will rest in her broker's hands.  It will be his/her decision what action will be made, because my colleague is also under the supervision of a broker.  "What's a girl to do" is not just her question.  Ultimately it becomes the broker's question.

Click here for part one of "What's a Girl to Do?".

Skateasaurus

Could it be these eyes that inspired Billie Holiday's song, "Jeepers, creepers, where'd you get those peepers?  Jeepers, creepers, where'd you get those eyes?"?  Probably not, since Billie was long gone before the Skateasaurus dino appeared on the north side of the Xcel Energy Center in St. Paul.  Even in the rain, she was ready for her awards.  She was created by Toni Dachis for her sponsor the 2008 U.S. Figure Championships.

As I promised, there was a dino siting today.  Several dinos were being secreted away in the back of a truck leaving the Minnesota Science Museum this morning.   Oh, for a camera, but my honey travels sans photography equipment!

What's a Girl To Do? Part I

"What's a girl to do?" asks my colleague.  That's how all ethical questions start, but this question was fraught with frustration.  My respected colleague who dots every "i" and crosses every "t" (and who had recently been dubbed as one of many unprofessionals by Chris Galler because she didn't meet his guidelines for number of annual transactions required to make one a professional) was seriously asking this question.  She was totally frustrated. 

She represented the buyers on the purchase of a St. Paul home.  At the closing table the listing agent produced the earnest money check written by her buyers 6 weeks earlier and pushed it across the table saying, "Take care of this."  What's the big deal her buyers and most consumers might ask.  Just take the check and give it to the sellers as part of the purchase price for their home.  Sorry, but it's not that easy.

Page one of the Minnesota Association of REALTORS® purchase agreement states "earnest money to be deposited upon acceptance of Purchase Agreement by all parties, on or before the third business day after acceptance, in the trust account of the listing broker . . ."   This is based on law, not common practice.  The listing agent had not only violated the law, but had also broken the terms of the purchase agreement thereby nullifying the purchase (However, according to Chris Galler, this agent was a professional because he was a top producer in a big company.  An opinion still based only on numbers, not level of competence!).

As the check crossed the table, and my colleague realized what it was, alarm bells clanged in her head!  Her eyes widened!  Panic set in.  This transaction might not close today because the listing agent hadn't done what he was required to do.  The mortgage company had verified funds to close based on the assumption that check was cashed.  That meant the buyers could be seen as that much money short of the required reserves they needed in their account.  The whole file might have to be rewritten and submitted to underwriting for a new approval!  "Ohhhhhh, nooooo!" screamed sirens in her head.

A call to the lender yielded a temporary fix.  Changes were made to the purchase agreement and both buyers and sellers initialed.  A new closing settlement statement was generated.  The loan officer said this was the solution, but had the underwriters been consulted?  Although the problem appeared solved, the St. Paul real estate agent was left at the table wondering, "What's a girl to do?"

More thoughts on this scenario will appear in Sunday's post.

The Dominos of Real Estate

My childhood play with dominoes was to line the pieces upright on their short end so that a tiny push to the end domino produced a cascade of falling dominoes until all were flat.  The more dominoes one could line up, the better.  Patterns could be made.  The cascade could have tributaries causing two rows to fall simultaneously.  Hours were spent carefully setting the dominoes on end, experimenting on twists and turns, and finally watching the whole row collapse.

Real estate is like dominoes, not the game, but the falling line.  In all markets (buyer, seller, or balanced) the domino effect is discussed.  The first domino might be Mr. Wanna  Buy who has an offer on 234 My Street that is contingent on selling his house at 123 His Way.  Ms. Canit Bee  makes an offer on 123 His Way contingent on selling her house at 890 Next Line.  Mr.  and Mrs. Sublime make a non-contingent offer on 890 Next Line.  The end of the domino line has been found.  When Mr. and Mrs. Sublime close on their purchase the domino falls to Ms.Canit Bee to close on hers which allows Mr. Wanna Buy to close on the St. Paul house he wants to buy and on down the line.  Sometimes the line is only two or three closings and sometimes it's more.  It's actually a logistical nightmare in scheduling because most sellers want to close on their new house the same day they close on their old house.

In like manner when St. Paul buyers are skittish as they have been the last year, the dominoes fail to fall.  Without that first purchase to start the line falling, they all remain standing!

The dominoes of real estate also affect other industries.  If St. Paul home buyers don't buy, but choose to wait until the market gets better, the impact is felt in other industries as well.  The title companies, mortgage companies, insurance agents,  home improvement centers, handymen, lawn care specialists, factory workers, car dealers, car washes, painters, plumbers, etc. are all impacted by the domino effect of money not being spent.  When title, mortgage, and insurance company employees are laid off, they no longer purchase goods and services from other industries.  Without real estate sales, people working in St. Paul housing related fields (which are a massive number of industries) are impacted.  Eventually those industries impact other goods and services and a full fledged recession is born . . . just because real estate buyers refused to push the first domino!

Real Estate Agents

Are St. Paul real estate agents checking out?  Chris Galler, Senior Vice President of the Minnesota Association of REALTORS® is advocating that very thing both historically and once again this month.  Normally whining is not my forte´, but the urge to whine is persistent when sales are slow  (less income),  real estate inventory is high (contributing to  buyers shopping forever), sellers are slow to realize prices have dropped (tough listing presentation), and the senior VP of my own trade organization says agents who don't have 9 transactions a year are not professional?   It could drive one to become a ranting raving maniac blogger!

An agent from one of the big local real estate companies and I were chatting in his open house.  We were comparing marketing strategies.  Did the internet produce leads or did paper ads?  (Paper ads are yielding zero return for a big dip in the agent's pocket!) Why was he doing an open house?  (To please the sellers.)  Does he advertise his opens?  (Not in the paper anymore as he's had more response from placing signs on the street and internet ads.  Is anyone reading the paper in paper form anymore?) 

The normal conversational progression led to whether agents are leaving the business.  His response was interesting.  In his office, he felt some real estate agents were "checking out". 

"Oh, really,"  says I.  "Do the membership numbers reflect that?"

Dropping their license was not the kind of "checking out" to which this agent was referring.  His impression was that some agents have kept their license but have become discouraged and mentally left the business.  They don't seem as committed to marketing for future business or marketing their current listings.  They seem discouraged by the lack of sales and abundance of inventory and essentially have given up.  What an interesting thought.  Could there be some truth in it?   

The Great Thing about Bloggers

The great thing about bloggers is that they can call a spade a spade.  Most bloggers are not paid to blog so honesty and catty opinions can be printed.  When American Home Mortgage Investment went under, some expressed their negative comments privately, but media sources were very careful to be politically correct in reporting the news.  Afterall, making an opinionated remark could cost the writer their job.  Not so with bloggers.  Here is a great example of how a blogger reports the American Home Mortgage fiasco (known more commonly as Ameriquest) which probably more accurately reflects the opinions of those whose escrow funds were pilfered away.  Check out Caveat Emptor who led me to The Consumerist for their take on the demise of Ameriquest!  Meow!

The Pink Dinosaur

She's like a coquette hiding in the greenery waiting for her true love.  That's a fine fantasy, except Pizza Luce´asaurus' beau probably will appear with a giant pizza and a pitcher of beer from her sponsor Pizza Luce´.

The famous Minneapolis pizza name has now opened a St. Paul location at 1183 Selby Ave.  Why the interior designers picked pink for a pizza parlour is beyond me*, but the creators of the pink dinosaur carried the interior design into their lovely dinosaur.  Maybe Pizza Luce´ has pink pizza!

*I know, I know.  It's all about true love!

More about Pizza Luce´.

Doom and Gloom

Is the glass half full or half empty?  Personally, my perception of the glass changes from day to day.  When I'm feeling gloomy, the glass is empty!  When I'm feeling upbeat, the glass is half full!  But, that perception is from me as an individual, not a society of people.

Regardless of how much we want to separate ourselves from the herd, the media still impacts our daily thoughts and forms perceptions for us.  A couple weeks ago RISMedia, an online nationally respected journal, published an article about how real estate agents should manage the potential home seller's expectations in the area of pricing their home. 

My first impression was the article was excellent . . . which is true.  On second reading, however, the doom and gloom hit me.  My experience with statistics is that one can massage them to create most any message one wants to hear, but some of the quoted numbers in this article brought the Ziggy cloud over my head!

• A survey by Boston Consulting Group in June, 2007, found that 55% of homeowners still believe their home is worth more today than last year.  Hmmmm.  The public has been taught by real estate professionals and the media that homes appreciate.  Why would the home owner think differently than they have been taught?  Were these owners screened to eliminate those who have made improvements or whose neighborhoods are next to a booming area of new development?  Were they only people whose homes are listed?  Were they people in a depressed real estate market or in a more stable market?  Too many questions about this statistic make me question the purpose of it being published.  Do I think my house is worth more this year than last?  No, but I know I paid more for my house than it was worth when I bought it.  If it was in pristine shape in a stable real estate neighborhood, I might have a different opinion. 
• First American Real Estate Solutions (Google search for that term produces First American Core Logic which sells statistical information) was cited as showing that if one house forecloses in a neighborhood, the average house in that neighborhood loses 5% of its value.  If 8% of the homes foreclose, the value of homes in that neighborhood goes down 20%.  This is a scary statement to me.  What I hear is that if one of my neighbors is injured or loses their job and their house goes into foreclosure as a result, my other neighbors and I get to suffer the consequences?  Again there are questions.  Can the home owner not sell the house and that's why it goes into foreclosure?  If that's the case, the real estate market may already have lost 5% in value which is not the result of the foreclosed house in the neighborhood.  Secondly, these numbers probably are averages across the nation and do not apply to local neighborhoods.
• After all of these scary statements, foreclosure statistics are forecast for the coming two and a half years by a website (RealtyTrac) who sells these foreclosure leads to real estate agents and consumers.  It is anticipated that more than 2 million homes will foreclose.  Is it possible a foreclosure frenzy might be in this company's best interests?  Frankly, if that is a national figure, I would like them to quote how that compares to the total number of homes owned.  The first quarter of 2007 is quoted as having 3 out of every one thousand homeowners going into foreclosure.  Is that a bad figure?  There's no comparison to former years to give us a baseline.  Three out of 1000 translates to .3% or three-tenths of a percent.  Is that higher than other years?  Again, these are national statistics.  How do they apply to local neighborhoods?

Even though the reality is that our St. Paul real estate market is seeing prices go down, the application of these horrendous statistics doesn't necessarily work in our local market.  As clients come to me, statistics for their specific neighborhood are generated from the MLS.  Doom and gloom doesn't always apply.  Some neighborhoods are holding strong.  Others are not.  I need to remember just like everyone else that because it's  printed in a well respected publication doesn't make it truth!

Me As a Meez

Only in my dreams!

Queen of Short Sales

To become the queen of short sales is not my aspiration in life.  It's not even my aspiration in real estate.  However, anyone in real estate today is bound to encounter a short sale.  Short sales are a transaction in which the lender allows the house to be sold for less than is owed on the property. 

The process of short sales is lengthy.  Initially the seller has to be delinquent on their mortgage payments.  Reasons for this delinquency vary and are not always something the seller has any control over.  Once the warning notices come from the bank, the seller knows they are in trouble.  Sometimes circumstances right themselves and the seller can work out a payment plan and get back on track.  If not, the home owner has the right to list the house for sale.

In St. Paul's real estate market, the house may not be worth the amount of the mortgage.  The home owner must inquire of the lender whether they will accept a short sale and if possible, find out how much of a discount the lender will accept.  Usually the lender will not give a figure at this stage of the transaction.

The home owner lists the house for sale with a disclosure that any offer will be contingent upon bank/lender approval.  When an offer comes in, the real estate agent must submit the offer and a preliminary settlement statement to the lender.  The seller has to submit proof of financial distress, a hardship letter of explanation, and various financial documents supporting their inability to pay.  The purchase agreement and the seller documents are packaged and sent to the "committee" for approval. 

The time it takes to get approval varies by lender.  Some companies complete approval in a short time while others take more than a month.  Many times the potential buyers get tired of waiting and withdraw their offer.

When a purchase agreement is accepted by the "committee", it will be accompanied by instructions for the short sale.  Usually these instructions include a deadline date for the short sale to close; the settlement statement which has to agree with the settlement statement at the closing OR someone has to come up with money out of their pocket; emphasis that NO funds are to be given to the seller; and a letter which must be signed by the seller for releasing the lien on the property.  The closing agent  must follow the specific directions from the lender or the short sale is nullified.

Acceptance of the purchase agreement by the lender is when the rest of the transaction appears to return to normal.  The inspection can be scheduled.  The appraisal can be ordered.  Closing documents will be prepared.  All parties will attend the closing and clear title will be conveyed to the buyers.  The difference in the process is that the payment to the lender is short of the amount owed and the seller has one extra document to sign acknowledging how that shortage will be handled.